With sales data in hand, it is relatively easy to establish qualification criteria for an incentive program. You take past performance, build in a stretch goal, and go. But what do you do when your fast growing company is rolling out brand new products every six to 12 months? Sales estimates are best guesses. Market research is spotty.
Even if you don't know exactly where to set the bar, you can still establish an incentive program that will spur sales and reward top producers. Here are a couple of options for structuring your program that don't rely on performance data.
Open-end Structure The philosophy behind an open-end incentive program is that the more one sells, the more one earns. Earnings are generally denominated in points. For each unit of product sold, a set number of points are awarded with no limit on the total points that can be earned. During or after the qualifying period, participants can redeem accumulated points for awards (typically merchandise and travel). The beauty of this type of program lies in its flexibility:
* Point awards can be varied by product type to place more or less emphasis on specific products.
* Special promotions, such as "double points," can be run for short periods to pump sales of a specific product.
A variation is to set a minimum sales hurdle before points are earned. This assures the company of an initial return on its investment and reduces administration by screening out marginal performers.
To use an open-end program, a company needs to know the profit margin on its products in order to calculate how many points to award for each unit sale. A rule of thumb is to award points equal in value to five to ten percent of a product's gross margin.
Closed-end Structure A closed-end incentive simply means that sales staff compete for a limited number of awards. This structure is typically used where the award budget is fixed, allowing only the top producers to qualify. The benefit is that a fixed budget can be established.
The downside of this approach is that it creates winners and losers--people who just missed qualifying may feel disappointed. We recommend tiered programs that permit degrees of winning, using travel awards (for the top performers) and merchandise awards (for mid-level performers) to help make the program motivating to a broader audience.
Rewarding Behavior A third option is to develop an incentive program that rewards sales behaviors rather than actual sales performance. Sales result from the consistent application of appropriate sales behaviors. If you know the selling behavior you need, you should consider rewarding those actions. In the high-tech industry, a seller's knowledge can be the key to closing a deal, so incentives for learning product features and capabilities can play a significant role in generating sales.
Their are several options for implementing learning incentives (often called 'Learn and Earn' programs). Interactive voice response telephony and question-and-answer Web sites are both popular for testing product knowledge because they provide unlimited flexibility to update and change a program.
A twist to 'Learn and Earn' programs that has helped improve comprehension is to award double points for getting all questions correct. For example, if a test has ten questions, participants get ten points for each correct answer, or 200 points if they're all right. The chance for a double reward is compelling enough to ensure that test takers know their stuff.
Whatever approach you take, don't let a lack of historic data discourage you. The appeal of any incentive is that the company gets maximum effort from the beginning. The results become the benchmark upon which to establish subsequent goals.